10/05/2011 @ 6:00PM

Obama's Phony Fight For Housing

For people who profess their desire to get the depressed housing market back on its feet the Obama Administration has been singularly inept. Despite numerous programs to allegedly help people keep their homes and prop up housing prices, the housing crisis continues, and home building is at a fraction of its levels before the bubble that began a little more than a decade ago. Here are things Washington would do if it were genuinely serious about alleviating this crisis:

– Order
Fannie Mae
and
Freddie Mac
to let homeowners whose equity is temporarily underwater refinance their mortgages as long as they have equity in their houses and are making their monthly payments. These folks are stuck with mortgages at rates of 5% and 6%. Since they have “skin in the game” and are servicing their mortgages, why not let them get the current lower rates? Obama professes to be the scourge of the rich, yet it’s high-income Americans who are reaping the most refinancing advantage from today’s minuscule mortgage interest rates.

– The Administration claims it wants to make it easier for repossessed or unoccupied houses to be turned into rentals. Good idea. But Fannie Mae and Freddie Mac both severely restrict the number of houses an entrepreneur can acquire for that purpose: ten at Fannie, four at Freddie. Remove the restrictions entirely. If someone is willing to risk capital to buy a lot of houses to rent out, by all means let them. It’s their money at stake, not the taxpayers’.

– Dust off an innovation used more than 20 years ago, when the real estate market in Texas and elsewhere collapsed during the savings-and-loan crisis: Let homeowners who can’t make their mortgage payments have the option–if they qualify–of signing a five-year lease on the house. Monthly payments would be lower, and there would also be less likelihood of abandoned houses depressing neighborhood property values. The lessees would have the option after five years of buying their houses at a discount or moving on.

– Drop the damaging lawsuits Fannie Mae and Freddie Mac filed against banks for alleged wrongdoing in underwriting packages of mortgages during the housing mania more than five years ago. This was less a crime than multitudinous stupidity. Let banks focus on the future instead of spending their efforts and capital on fighting government shakedowns. If banks are to be held criminally liable for what happened, then the biggest culprits of all– the easy-money Federal Reserve and the government-sanctioned monopolies, Fannie and Freddie–should be headed (pun intended) for the guillotine.

– At the same time urge the courts not to upend the settlement
Bank of America
made over allegedly questionable activities perpetrated by Countrywide Financial, the company it acquired in 2008. Some state attorneys general want a bigger payoff than the $8.5 billion BofA has offered. The Administration should tell them, as the Brits would put it, to “bugger off.” To mix metaphors, if the pols overmilk this BofA cow they could well flip its mortgage entities into bankruptcy, and the AGs would get far, far less than that $8.5 billion.

– Stop the Federal Housing Administration from guaranteeing mortgages with ultralow down payments and other questionable underwriting practices. The FHA is well on its way to joining Fannie Mae and Freddie Mac as a big financial disaster.

Here They Go Again

When it comes to taxes, Germany and France are still wearing dunce caps. Under their prodding the European Commission has unveiled a plan to create a financial transaction tax: Buy or sell stocks, bonds or derivatives and you’ll pay tribute to the EU. Proponents say the cash is needed to pay for past bank bailouts and perhaps future ones.

If Paris and Berlin weren’t existing in a bubble, policymakers there would quickly realize that the securities business will move to more hospitable climates. The Obama Administration told European finance ministers that such an exaction would not be imposed in the U.S. But so hungry are these policymakers that the negative consequences have sailed over their heads. Even the opposition of Britain and Sweden couldn’t stop this latest tax juggernaut.

There’s another warped idea at work here–the notion that such a levy will make securities more stable in price because it will crimp the style of in-and-out speculators. Vain politicians refuse to accept that it was their easy money, easy spending, high taxes and suffocating regulations that have made their economies as vibrant as a stagnant swamp.

If the U.S. would only repeal Sarbanes-Oxley and a new President in 2013 follow through with a stable-dollar policy and tax simplification, our nation would once again become the undisputed capital market center of the world.

Misleading “Market”

The other day the Wall Street Journal ran an analysis of actual trades that make up the credit-default-swap market. Quotes of prices of these swaps are treated by market participants, credit-rating agencies and even governments–like stock market indexes for equity markets–as an accurate barometer of the creditworthiness of countries and companies.

Too often, though, it appears that the thin CDS market is being used to create a market direction and influence bond ratings rather than insure an investor against default. Some observers believe this kind of market distortion abounded during the crisis of 2008 to create bear raids against certain insurance companies and large retailers. Now they seem to be an instrument creating havoc on the sovereign debt of troubled countries such as Spain and Italy. Yet, as the WSJ noted, “actual trades in these widely cited derivatives are few and far between–and the quotes that market observers bandy about often aren’t based on actual trades at all.”

One of our columnists, noted economist David Malpass, has long warned of economic harm from the CDS market. This is where regulatory-mandated transparency in the actual volume behind CDS prices would do a world of good.

The reincarnation of Cafe des Artistes may be a miss in the harsh modernist makeover of the space, but it’s a big success regarding service and food. Perfection: Dover sole, thinly sliced veal loin in lemon sauce and granita al caffe (iced espresso with dollops of rich, homemade whipped cream).

The Darby

244 West 14th St. (Tel.: 212-242-4411)

The jazz band at this lush spot is on the loud side, but the food is very good: tasty oysters Rockefeller; perfectly battered, crispy calamari; pink and tender rack of lamb; plentiful sides of crunchy brussels sprouts and three-cheese macaroni; and sublime apple bread pudding with calvados ice cream.

Five Napkin Burger

630 Ninth Ave., at 45th St. (Tel.: 212-757-2277)

Great American bistro fare–and much more–at the edge of the theater district in Hell’s Kitchen. Try the sizzling, plump burgers; the sushi and tempura; the Hell’s Kitchen wings; the chunky lobster rolls; the crispy fish & chips or the half-pound Kobe beef hot dog. All at reasonable prices.